RESIDENTS face seeing a council tax rise or a cut in council services after the Welsh Assembly announced a £1.49m cut to Merthyr Tydfil’s annual allowance.

Merthyr Tydfil County Borough Council was given £86m for 2011/12 under the local government spending plan announced by minister for local government Carl Sargeant on Tuesday.

The funding settlement represents a 1.4% cut to the council’s budget and there are concerns this may force the local authority into a council tax increase.

Andrew Barry, the president of Merthyr Tydfil Chamber of Trade, said: “This settlement will mean a raise in council tax – I think that is inevitable – and it will mean some cuts to services.

“There is no getting away from the state of the economy in Merthyr and in Wales and everyone is going to have to shoulder some of the burden.

“We have the double whammy in Merthyr of having a high benefit dependency and the redundancy threat from the job cuts to the public sector. That combination is stifling spending here.

“There are no positives to come out of this settlement but we have to look at the wider picture.”

Karl Griffiths, 32, from Twynyrodyn, Merthyr, is best known in the Valleys as wrestler Caiman.

He said: “If council tax does go up, it would be crippling for me. I can hardly afford to pay it at the moment so I would have to sell my house and look in another area.”

A spokeswoman for Merthyr Council said: “While the settlement is slightly better than anticipated, the reduction in financial support will mean that tough decisions will have to be made over where these reductions will impact.

“All services areas will be affected and the council will have to consider these implications in the coming months.”

Announcing his settlement decisions on Tuesday, Mr Sargeant told town halls he would not order them to absorb all the cuts without passing on the cost to ratepayers.

But he warned councils planning a council tax rise: “It will be for each authority to justify their decision on this to their citizens.”

He added: “There can be no respite. The challenge of delivering good quality services for less money continues.”

Merthyr Tydfil Assembly Member Huw Lewis praised Mr Sargeant for his plan to stop councils using money for education and social care for other purposes.

He said: “This is a fair deal from the Welsh Government for Merthyr Council given the current financial climate and the cuts we have seen imposed on Wales.

“It’s particularly pleasing to see Carl Sargeant pledge protection for social services and education within the funding to make sure our most vulnerable people continue to receive the full support that they need.”

In contrast to Merthyr’s negative settlement, Cardiff Council received a net 0.1% increase to their Welsh Assembly grant.

Mr Barry said: “It’s all well and good to have Cardiff as Britain’s fastest-growing city, but that doesn’t help us in Merthyr.

“The gap between us and Cardiff is growing on an annual basis. The Valleys are becoming more and more deprived with less and less inward investment.

“The same small increase Cardiff have received could mean new jobs and new services for Merthyr.

“Cardiff already has wealth beyond most people in the Valleys’ dreams and it’s a little insensitive for them to receive as increase and us a cut.”